TIDMPILR
RNS Number : 9020W
Pacific Industrial & Log REIT PLC
20 November 2017
Pacific Industrial & Logistics REIT plc
("Pacific Industrial & Logistics," the "Company" or the
"Group")
Interim results for the six months ended 30 September 2017
Strong underlying performance during transformational period
Pacific Industrial & Logistics REIT plc, (AIM: PILR) the
specialist UK industrial and logistics REIT, issues its interim
financial results for the half year ended 30 September 2017.
Highlights 30 Sep 30 Sep
17 16
-------------------------- ------- -------
Income statement
EPRA earnings (GBPm) 0.2 0.4
EPRA EPS (p) 0.5 3.9
Adjusted EPS (p)* 2.4 3.9
Reported profit (GBPm) 3.1 2.6
Net rental income (GBPm) 1.5 1.0
Interim dividends (p) 1.23 3.00
Balance sheet
EPRA NAV per share (p) 116.12 117.77
Net borrowing (GBPm) 18.4 15.4
LTV (%) 19.7 51.3
*Adjusted EPS reflects earnings from underlying operating
business adjusting for the LTIP charge
Transformational period
-- GBP53.0m of equity capital raised from new
and existing investors in August 2017, increasing
market capitalisation by over 200%
-- GBP45.5m invested in an off-market acquisition
of nine logistics assets at 7.3% net initial
yield in September 2017
Portfolio metrics reflect sustainable income and growth
-- Property valuation uplift of GBP2.8m, with
the portfolio owned at 1 April 2017 increasing
by 7.5% during the period compared to IPD
All Property Capital Growth of 2.4%
-- Portfolio valuation at 30 September 2017 of
GBP93.4m, reflecting an average net initial
yield of 6.7% representing an increase of
GBP10.2m, or 12.3%, when compared to purchase
prices
-- Portfolio occupancy of 98.1% and WAULT of
5.4 years (4.4 years at 31 March 2017)
-- Rent reviews during period increased passing
rents by an average of 15.9%
-- High-quality tenant base includes: Culina,
XPO, Sainsbury's, Travis Perkins and Puma
Post period highlights
-- On 10 November 2017, purchased site in Leeds
for GBP2.8m at 6.8% net initial yield
-- On 16 November 2017, disposed of site in Bedford
for GBP5.8m, representing an IRR of c. 43%
and a net initial yield of 6.0%
Outlook
-- Strong tenant demand for strategically located
urban supply chain assets, driving focus on
single-let units in the GBP3m - GBP10m price
bracket
-- Rising rental growth due to mismatched demand
and supply of facilities and increased land
prices and build costs
-- Strong acquisition pipeline with Group in
advanced stage of acquiring a portfolio of
assets
Dividends
-- Interim dividend for the financial year ended
31 March 2017 of 0.23 pence
-- Interim dividend for the financial year ended
31 March 2018 of 1.00 pence
Nigel Rich, Chairman, commented:
"We have continued to make good progress assembling a
high-quality portfolio of industrial and logistics assets,
accelerated by our recent placing which significantly increased the
scale of the business. Having acquired a portfolio of nine
industrial and logistics assets during the period, all of which
have the potential to achieve strong income and capital returns for
the Group, we are also in an advanced stage of negotiations to
acquire further properties from our pipeline of opportunities.
"Our focus is on the 'last mile' needs of a diverse tenant base,
especially those responding to the opportunities of e-commerce and
supply chain development. This in turn creates opportunities to
enhance shareholder returns through careful asset selection and our
asset management initiatives."
- Ends -
For further information contact:
Pacific Industrial &
Logistics REIT plc
Richard Moffitt
Christopher Turner
Sam Tucker +44 (0)20 7591 1600
Canaccord Genuity - Nominated
Adviser and Broker
Bruce Garrow
Charlie Foster +44 (0)20 7523 8000
Montfort - Financial
PR and IR adviser
Nick Miles
Olly Scott +44 (0)78 1234 5205
About Pacific Industrial & Logistics REIT
Pacific Industrial & Logistics REIT plc is a property
investment company, quoted on the AIM market of the London Stock
Exchange, (AIM: PILR).
The Company has been established to invest in UK based
industrial and logistics properties with the objective of
generating attractive dividends and capital returns for its
shareholders. Its investment strategy focuses on strategically
located smaller single-let industrial and logistics properties
servicing high-quality tenants. Investment returns will be
generated by an experienced management team focusing on quality
stock selection and active asset management.
A number of structural and commercial factors currently support
the attractive opportunity in the last mile/regional industrial and
logistics real estate sub-sectors targeted by the Company,
including: strong occupier demand, (driven by the growth of
e-commerce and investment by retailers in their associated supply
chain) and a decline in the supply of lettable space in industrial
and logistics real estate across the UK (being more than one third
lower than the most recent peak of 2009).
Acquisitions are targeted in the 6.5-7.5% net initial yield
bracket, with affordable underlying rents in the region of
GBP4.50-GBP5.50 per sq ft, on an overall LTV of 35-40% and a
significant margin over financing costs, thus presenting attractive
income, capital growth and total return opportunities.
Chairman's statement
We have made good progress implementing our strategy of focusing
on industrial and logistics assets in the 'last mile' of the supply
chain, serving a diverse and high-quality tenant base. The first
half of this financial year has been a transformational period for
the Company, during which it deployed a substantial proportion of
its capital growing its portfolio; raising additional equity of
GBP53m which increased its market capitalisation by over 200% and
further diversified its shareholder base.
In our sub-sector of the real estate market, we continue to
believe in the relative attractions of our focus on modern urban
logistics assets which benefit from structural growth and display
highly defensive characteristics; including, high occupancy and
security of income, which provide the opportunity for rental
growth.
As the government continues to navigate Britain's uncertain
passage through the Brexit process, investors are naturally drawn
to companies that can offer asset-backed income. The Company
continues to construct a portfolio that offers secure income from
good quality tenants, with the prospect of an attractive total
return through asset management initiatives.
Investment activity
The Company acquired a portfolio of nine logistics assets for
GBP45.5m on 28 September 2017. The acquisition was sourced
off-market at a net initial yield of 7.3% and was in line with the
Company's investment strategy.
Since the financial period end, a logistics asset has been
acquired in Leeds for a total consideration of GBP2.8m and a
property in Bedford has been sold from our portfolio for a total
consideration of GBP5.8m, representing a strong return for the
Group that is 64% above cost when purchased at IPO, 19% above book
value at 31 March 2017 and represents an IRR of approximately 43%.
With the balance of the August 2017 fundraising remaining to be
deployed, together with available bank facility debt, the Company
is at an advanced stage of acquiring a portfolio of assets from its
pipeline. In addition, further acquisition opportunities are in the
execution phase.
Financial results
The Group's financial performance from the underlying portfolio
for the period was positive, with net rental income totalling
GBP1.5m. Profit, pre-interest and LTIP charge and gain on the fair
value of investment properties, was GBP1.1m. The EPRA NAV per share
at 30 September 2017 was 116.12 pence.
The period under review has seen a significant equity raise
which has increased the market capitalisation of the business.
Whilst positive for the Group in the medium term, this in turn has
diluted earnings for the financial period, compared to the prior
year, in the short term.
At the half year, the enlarged portfolio of properties was
valued at GBP93.45m, with the portfolio in place at 1 April 2017
increasing in value by 7.5% over the six-month period, driven
principally by active asset management rather than yield
compression.
The Group has a debt facility with Santander totalling GBP50m,
of which GBP18.4m was drawn at year end - further amounts are to be
drawn down against new assets to be acquired in due course. This
facility has a term of three years. The loan to value (LTV) at 30
September 2017 was 19.7% which will increase as further
acquisitions are made by the Group. In the medium term the Group's
target LTV is 35-40%. The term facility is in the course of being
re-negotiated with Santander to accommodate a longer term of five
years and improvement in margin.
Dividends
The Board has declared a third interim dividend for the
financial year ended 31 March 2017 of 0.23 pence per share and an
interim dividend relating to the half year ended 30 September 2017
of 1.00 pence per ordinary share. These will be paid as property
income distributions (PIDs) on or around 22 December 2017 to
shareholders on the register at the close of business on 1 December
2017. The ex-dividend date will be 30 November 2017.
Management agreement
In August 2017, and in conjunction with the capital raise, the
terms of the management agreement with Pacific Capital Partners
Limited were amended. With effect from 17 August 2017, a new
management fee of 0.95 per cent. per annum of the Group's EPRA NAV,
payable quarterly in arrears was put in place. The existing LTIP
was also amended at that time, with the performance over the period
from IPO to 13 July 2017 crystallised, such that there is now an
EPRA NAV element to the calculation and the annualised hurdle has
been increased from 8% to 9%.
Outlook
The Board believes that the Manager has delivered an encouraging
performance since IPO in April 2016 based on its active asset
management, with rent reviews and lease renegotiations driving
rental and capital growth. The Board believes that by consolidating
a quality regional and urban logistics portfolio across established
logistics regions and adjacent to cities across the Midlands, the
Group will offer investors exposure to a sector that provides yield
and attractive returns. As the funds raised during the period are
invested in properties, this should benefit the second half of the
financial year and shareholders will see this impact come through
for the full financial year.
As companies operating in business-to-consumer and
business-to-business markets drive demand for strategically located
supply chain assets, the urban logistics 'last mile' real estate
asset class remains appealing. We see strong drivers of rental
growth remaining in the logistics market due to the imbalance
between occupational supply, increase of land prices and build
costs and continuing demand for distribution space.
We are confident that we are assembling a portfolio of
properties that will generate good returns for shareholders in the
foreseeable future.
Nigel Rich CBE, Chairman
Manager's report
The urban logistics sub-sector of the UK real estate market is
attracting investor interest due to the general shortage of higher
yielding, liquid assets. The sub-sector's underlying fundamentals
remain strong in the face of the Brexit process, as consumer and
business-facing companies continue to migrate online, increasing
sales by 16% to GBP133 billion in 2016 and forecast to grow a
further 14% in 2017, (Source: CoStar). Demand for regional
warehouse space remains high and supply is constrained, driving
rental growth. For example, MSCI figures show logistics assets in
Leeds and Birmingham witnessed rental growth of over 7.5% in the 12
months to Q2/17.
As occupiers increase their use of smart technology, for example
transport automation and robotics, warehouse occupiers will need to
find locations close to city centres as same day delivery becomes
ever more important. The rise of same-day delivery across the UK in
particular has led to an increase in smaller distribution
warehouses that are closer to the customer. Our focus is on
single-let sites, rather than multi-let, as we believe in the
attractions of minimal service charges, efficiency of operation,
(compared to those of large multi-let sites) and a more
stream-lined approach to asset management led initiatives.
The Group will continue exploiting the significant opportunity
in this sub-sector of the UK industrial and logistics market due to
strong tenant demand, limited stock and current lack of speculative
development. Through the Manager's access, track record and
experience, we are well-placed to continue sourcing attractive new
acquisition and asset management opportunities, whilst remaining
disciplined in our investment approach.
Portfolio update: investment and valuation growth
CBRE independently valued the portfolio at the period end in
accordance with the RICS Valuation - Professional Standards, (the
'Red Book'). The portfolio's market value was GBP93.4 million,
compared with the assets' combined purchase price of GBP83.2
million, excluding purchaser costs. This represents an increase of
GBP10.2 million or 12.3%, when compared to the purchase prices. The
valuation increase reflects our focus on asset management and
buying well-located sites. It also highlights our success in
sourcing off-market deals at attractive prices for the Group.
The Group acquired a further nine assets during the period, such
that at the period end the portfolio comprised:
Tenant Location Acquired Cost* Net Book Value (GBP'000) Size
(GBP'000) (sq ft)
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
Price's Patent Candles Ltd Bedford Apr 16 2,200 2,390 44,195
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
Jas Bowman & Sons Ltd Bedford Apr 16 2,675 3,325 39,306
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
The BSS Group Ltd Northampton Apr 16 750 900 13,633
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
ACO Technologies plc Bedford Apr 16 1,675 3,025 41,603
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
Blackburn Metals Ltd Bedford Apr 16 1,250 1,750 24,380
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
Ball and Young Ltd Bedford Apr 16 1,100 1,650 22,535
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
Ideal Industries Ltd Bedford Apr 16 2,850 2,300 42,392
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
P W Gates Distributions Ltd Bedford Apr 16 2,300 5,485 59,607
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
Marshall Thermo King Ltd Dunstable Apr 16 600 900 9,912
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
Winit (UK) Ltd Bardon Apr 16 6,000 6,350 73,791
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
Void(1) Bedford Apr 16 1,393 1,629 21,137
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
Professional Fulfilment Services Ltd Bedford Apr 16 1,394 1,631 21,161
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
Arqadia Ltd Bedford Apr 16 2,813 3,290 42,700
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
Void(2) Chesterfield Jan 17 4,659 5,800 108,873
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
PUMA United Kingdom Ltd Leeds Mar 17 6,050 6,250 63,979
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
HID Corporation Ltd Haverhill Sep 17 4,090 4,300 37,355
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
Culina Logistics Ltd Haverhill Sep 17 14,150 14,900 194,965
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
XPO Transport Solutions UK Ltd Leigh Sep 17 3,340 3,340 39,720
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
XPO Transport Solutions UK Ltd Motherwell Sep 17 2,420 2,560 100,832
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
Void(3) Nuneaton Sep 17 6,710 6,710 130,508
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
XPO Supply Chain UK Ltd Hinckley Sep 17 3,280 3,280 62,082
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
XPO Transport Solutions UK Ltd Normanton Sep 17 6,110 6,110 94,102
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
J. Sainsbury plc Hoddesdon Sep 17 3,950 4,030 45,018
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
Travis Perkins (Properties) Ltd Hoddesdon Sep 17 1,480 1,540 10,935
-------------------------------------- -------------- ---------- ----------- ------------------------- ----------
Total at 30 September 2017 83,239 93,445 1,344,721
------------------------------------------------------------------ ----------- ------------------------- ----------
* Excluding purchaser costs
1. Void from 24 March 2017.
2. Void from 1 June 2017 - rent guarantee in place until 31
December 2017.
3. Void from 28 September 2017 - rent guarantee in place until
27 September 2019.
The Group's acquisitions have proven to be quality investments,
providing a diverse mixture of tenancies and asset management
opportunities, which have the potential to provide both income
growth and capital appreciation.
At the period end, the average size of the portfolio's
properties was 61,124 sq ft with a weighted average unexpired lease
term of 5.4 years, (4.4 years at 31 March 2017).
Portfolio highlights
During the period, a number of initiatives were undertaken to
improve the portfolio's valuation. Select highlights include:
P W Gates, Bedford
The property is located to the north west of Bedford, within the
Elms Farm Industrial Estate. It is a 59,607 sq ft logistics unit
that sits c.1.0 miles from the A421. It is a well maintained and
configured warehouse with a good covenant.
During the period, the Manager introduced a new tenant at
GBP6.29 sq. ft. on a 10-year lease with a 5-year break. The
previous rent was GBP6.00 sq ft with a 3-year unexpired lease
term.
Features: annual passing rent - GBP375,050; size - 59,607 sq ft;
rent - GBP6.29 per sq ft; tenure - freehold.
Winit UK, Bardon
This is an established facility in a leading distribution
location close to the M1 motorway. It is a modern unit with three
bays and minimum eaves height of 10 meters.
During the period, a tenant break option was removed and there
has been an improvement in expected reversion.
Features: annual passing rent - GBP356,000; size - 73,791 sq ft;
rent - GBP4.82 per sq ft; tenure - freehold
BSS Group, Northampton
This is a well configured warehouse with two bays and a trade
counter. It is located in an established commercial location in the
heart of Northampton, an area that has witnessed strong rental
growth this year.
During the period, a rent review was settled at an increase of
11% to the annual passing rent.
Features: annual passing rent - GBP71,500; size - 13,633 sq ft;
rent - GBP5.24 per sq ft; tenure - freehold
Financial results
Operating profit for the period was GBP3.3 million. There were
two principal drivers of this positive performance. The first was
the portfolio's strong rental income, following successful rent
reviews and lease extensions which at the period end equated to a
running yield of 6.7%. The second was the successful asset
management undertaken during the period which was in line with our
Investment Policy and undertaken across a number of sites, with
further initiatives available to the Manager.
Administrative and other expenses, which include the Manager's
fee, (excluding the LTIP charge) and other costs of running the
Group, were GBP0.4 million, equivalent to 0.5% of the portfolio's
market value at 30 September 2017. EPRA cost ratio, including
vacancy costs, was 28.6% for the period - with the vacancy rate a
low 1.9% at period end.
Investment activity
After the period end, the Manager purchased a logistics asset at
Victoria Road, Seacroft, Leeds for a total consideration of GBP2.8
million. The purchase price represents a net initial yield of 6.8%
and the site has a rent of GBP5.00 per sq ft, with reversionary
potential. It comprises a modern 41,494 sq ft logistics warehouse
which is let to Komori UK Limited and Pharmacy2u Limited on leases
through to 2020 and 2022 respectively. Both have outstanding rent
reviews. We note that this site recently won best 'New Facility' at
The Logistics Awards 2017, which recognises operational excellence
among companies within the logistics and supply chain sectors.
Also after the period end, the Company completed the sale of a
site located at Hammond Road, Bedford, for a total consideration of
GBP5.8 million, representing a net initial yield of 6.0%. The
disposal follows the recent letting of the property on a 10-year
lease to P W Gates (mentioned above) and the total consideration is
a 64% gain on the asset's cost when purchased at the time of the
Company's April 2016 IPO, representing an IRR of approximately 43%
and a 19% premium to book value as at 31 March 2017.
The focus of the Manager will be to continue acquiring
attractive assets with the potential for rental growth in light of
the current market dynamic of diminishing supply and increasing
occupier demand.
The Company intends to deploy the proceeds of the disposal
together with the remaining equity from the recent fundraising and
its available debt funding resources back into its high-quality
pipeline of industrial and logistics opportunities. These include a
portfolio of assets which is being held under an exclusivity
arrangement with due diligence well progressed and a number of
other suitable portfolios and assets that meet the Company's
investment criteria.
Market overview
The industrial and logistics market in the UK continues to see
resilient occupier demand outweighing available supply.
Under-investment in the sector is due to substantial barriers to
entry, including: the cost of replacement; availability of land;
planning constraints and letting risk. These factors create a
supply constraint of quality industrial and logistics assets across
the UK.
Strong occupier demand, owing to the growth in e-commerce and
investment by retailers and suppliers in e-fulfilment supply chain
capability, also means that there is sustained low void across
strategic locations with good links to transport
infrastructure.
During 2017 we have seen total return potential supported by
structural growth and strong ongoing rental growth prospects. The
sharp fall in sterling following the EU referendum should continue
to support exports and the manufacturing sector, with e-commerce
growth also expected to provide strong cyclical and structural
support.
The logistics market's total return in H1/17 was 5.0%, an
improvement on H1/16 (4.4%) and H2/16 (4.1%) (Source: CBRE). This
improvement is driven by stronger capital growth with stable rental
growth over the period, although we expect this to pick-up and be
reflected over the full calendar year.
A wider range of facilities will underpin the sector's future
transformation, notably XXL warehouses, (with several floors) and
urban logistics centres, where we are focused. Speculative
development remains subdued as occupiers shift to purpose-built
factories and development finance remains limited in the current
economic climate.
Market outlook
The Board and the Manager believe that this sub-sector of the
real estate market continues to show resilience in the context of
wider economic and political uncertainty.
Underlying market conditions remain favourable for UK business
and we see ongoing activity across our diverse occupier base of
SMEs, logistics firms and larger companies.
The UK continues to be one of the fastest-growing adopters of
online retail and there is a requirement for tenants to develop
their e-fulfilment capability accordingly. As such, strategic
regions across the UK are experiencing year-on-year improvements in
leasing activity. In the longer-term, demand for sites will
fluctuate with economic drivers including: the value of sterling;
manufacturing and production exports; domestic consumption; and
Brexit. However, the UK has relatively high barriers to entry,
(compared to other European markets) with respect to planning and
development, so we expect sustainable growth for the foreseeable
future.
Target market
Yields on target investment sites in the GBP3 - GBP10 million
range remain approximately 1.0% higher than those of larger lots
over GBP10 million as investors and larger real estate investment
trusts are typically focused on larger lot sizes. Smaller lots
trade at a discount to more institutional grade assets due to the
reduced weight of money targeting this stock. The Manager is
focused on maintaining and building existing tenant relationships
with a view to extending the Group's reputation as a leader in the
smaller lot size logistics market.
Supply
Supply levels for logistics properties peaked in 2009 following
a period of speculative development in the run-up to the economic
downturn. Following strong occupational demand over recent years,
there is now a significant shortage and supply levels appear to be
stabilising, having risen in recent years.
Whilst there have been recent steps towards the speculative
development of smaller floorplate buildings, this has yet to result
in availability matching the requirement for take-up across the UK.
Indeed, supply is focussing more on second-hand space with new and
early marketed space, (units within six months of practical
completion) contracting (Source: CBRE Logistics Report H1 2017 -
The Property Perspective). Supply remains low by historical
standards and there remains a lack of land allocated for warehouse
development, particularly across the Midlands where interest and
enquiries are being registered on schemes that have yet to secure
planning permission. There remain very few large strategic sites
across the Midlands that are in a position to quickly move forward
and meet demand. We also note that since the EU referendum there
has been a reduction in speculative commitments by developers
whilst good quality demand has held up.
The logistics sector will also be impacted by the introduction
of the Minimum Energy Efficiency Standard (MEES) regulations from
April 2018 which will prevent 'substandard' property, where an EPC
falls below the minimum standard of an E banding, from being
let.
Demand
Demand for smaller lot size warehouses has been strong in recent
years, the underlying drivers being a lack of new building
availability and high replacement cost. The Manager will continue
to focus on purchasing sites below replacement cost.
We note that online retail accounted for a third of all take-up
during H1/17 and was the most acquisitive sector, taking greater
space than traditional grocery chains and other retailers.
Another significant feature of demand is the emergence of new
locations, traditionally seen as secondary. These have come to the
fore due to the limited supply in many prime areas around London.
For example, in the South East the lack of supply has led to
occupiers considering alternative locations elsewhere - with the
South West and West Midlands achieving take-up well above long-run
averages.
Acquisitions
Investment volumes remain high and the sector is undeniably
popular. The sector's superior returns in 2016 allied to projected
rental growth prospects have proven highly attractive to both
existing and new entrants. With alternative assets generally
providing low returns there is continued search for yield and
growth. With the pricing gap between logistics property and 10-year
gilt yields remaining as wide as it has been since 2010, we are
well positioned to continue to achieve our target returns for our
investors.
Richard Moffitt
17 November 2017
Independent Review Report to Pacific Industrial & Logistics
REIT plc
1. Introduction
We have been engaged by the Pacific Industrial & Logistics
REIT plc ("the Company") to review the condensed set of financial
statements in the interim report for the six months ended 30
September 2017 which comprise the Condensed Consolidated Statement
of Comprehensive Income, the Condensed Consolidated Statement of
Financial Position, the Condensed Consolidated Cash Flow Statement
and the Condensed Consolidated Statement of Changes in Equity and
related explanatory notes.
We have read the other information contained in the interim
report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial
information in the condensed set of financial statements.
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the
requirements of the AIM Rule 18. Our review has been undertaken so
that we might state to the Company those matters we are required to
state to it in this report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company for our review work, for this
report or the conclusions we have reached.
2. Directors' responsibility
The interim report is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the interim report in accordance with AIM Rule 18.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with IFRS as adopted by the
European Union. It is the responsibility of the directors to ensure
that the condensed set of financial statements included in this
interim report have been prepared on a basis consistent with that
which will be adopted in the Group's annual financial
statements.
3. Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the interim report
based on our review.
4. Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom.
A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK and
Ireland) and consequently does not enable us to obtain assurance
that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
5. Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the interim report for the six months ended 30 September 2017 is
not prepared, in all material respects, in accordance with the
requirements of the AIM rules.
Nexia Smith & Williamson
Statutory Auditor
Chartered Accountants
25 Moorgate
London
EC2R 6AY
17 November 2017
Condensed Consolidated Statement of Comprehensive Income
Six months to Period to Year ended
30 Sep 17 30 Sep 16 31 Mar 17
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
-------------------------------------------------------------------- ----- -------------- ------------ -----------
Rental income 1,530 988 2,277
Cost of sales (72) (10) (25)
Gross income 1,458 978 2,252
Administrative and other expenses (377) (234) (499)
Long-term incentive plan charge 8 (597) (17) (34)
-------------------------------------------------------------------- ----- -------------- ------------ -----------
Operating profit before changes in fair value of
investment properties and interest rate derivatives 484 727 1,719
-
Changes in fair value of investment property 10 2,829 2,383 3,881
-------------------------------------------------------------------- ----- -------------- ------------ -----------
Operating profit 3,313 3,110 5,600
Finance income 3 - 2
Finance expense 5 (321) (327) (600)
Changes in fair value of interest rate derivatives 13 61 (174) (115)
-------------------------------------------------------------------- ----- -------------- ------------ -----------
Profit before taxation 3,056 2,609 4,887
-------------------------------------------------------------------- ----- -------------- ------------ -----------
Tax credit/(charge) for the period 6 - - -
-------------------------------------------------------------------- ----- -------------- ------------ -----------
Profit and total comprehensive income (attributable to the
shareholders) 3,056 2,609 4,887
-------------------------------------------------------------------- ----- -------------- ------------ -----------
Earnings per share - basic 7 9.28p 44.33p 46.80p
Earnings per share - diluted 7 9.25p 43.66p 46.40p
EPRA earnings per share 7 0.50p 3.85p 7.82p
Condensed Consolidated Statement of Financial Position
Six months Period Year
to to ended
30 Sep 30 Sep 31 Mar
17 16 17
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
------------------------------- ----- ------------ ------------ ----------
Non-current assets
Investment property 10 93,445 29,900 43,420
------------------------------- ----- ------------ ------------ ----------
Total non-current assets 93,445 29,900 43,420
Current assets
Trade and other receivables 1,561 181 535
Cash and cash equivalents 6,541 1,890 1,680
------------------------------- ----- ------------ ------------ ----------
Total current assets 8,102 2,071 2,215
------------------------------- ----- ------------ ------------ ----------
Total assets 101,547 31,971 45,635
------------------------------- ----- ------------ ------------ ----------
Current liabilities
Trade and other payables (2,272) (860) (632)
Deferred rental income (584) (513) (676)
------------------------------- ----- ------------ ------------ ----------
Total current liabilities (2,856) (1,373) (1,308)
Non-current liabilities
Long term rental deposits (784) (670) (645)
Redeemable preference - (2,000) -
share
Interest rate derivatives 13 (54) (174) (115)
Bank borrowings 12 (18,247) (15,147) (18,196)
------------------------------- ----- ------------ ------------ ----------
Total non-current liabilities (19,085) (17,991) (18,956)
------------------------------- ----- ------------ ------------ ----------
Total liabilities (21,941) (19,364) (20,264)
------------------------------- ----- ------------ ------------ ----------
Total net assets 79,606 12,607 25,371
------------------------------- ----- ------------ ------------ ----------
Equity
Share capital 14 681 103 215
Share premium 15 71,832 9,787 20,454
Share warrant reserve 89 91 91
Other reserves 15 17 34
Retained earnings 6,989 2,609 4,577
------------------------------- ----- ------------ ----------
Total equity 79,606 12,607 25,371
------------------------------- ----- ------------ ------------ ----------
Net Asset Value per
share basic 17 116.87p 122.18p 118.26p
Net Asset Value per
share diluted 17 116.04p 116.47p 115.64p
EPRA Net Asset Value
diluted 17 116.12p 117.77p 116.11p
Condensed Consolidated Cash Flow Statement
Six months Period Year
to to ended
30 Sep 30 Sep 31 Mar
17 16 17
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
------------------------------ ----- ------------ ------------ ----------
Cash flows from operating
activities
Profit for the period
(attributable to equity
shareholders) 3,056 2,609 4,887
Less: changes in fair
value of investment
property 10 (2,829) (2,383) (3,881)
Add/(less) changes in
fair value of interest
rate derivatives 13 (61) 174 115
Less: finance income (3) - (2)
Add: finance expense 5 321 327 600
Long-term investment
plan 8 597 17 34
Increase in trade and
other receivables (1,025) (159) (513)
Increase in trade and
other payables 1,533 582 551
------------------------------ ----- ------------ ------------ ----------
Cash generated from
operations 1,589 1,167 1,791
Net cash flow generated
from operating activities 1,589 1,167 1,791
------------------------------ ----- ------------ ------------ ----------
Investing activities
Purchase of investment
properties 10 (5,879) - (12,022)
Acquisition of a subsidiary,
net of cash acquired 11 (41,160) (26,135) (26,135)
Net cash flow used in
investing activities (47,039) (26,135) (38,157)
------------------------------ ----- ------------ ------------ ----------
Financing activities
Proceeds from issue
of ordinary share capital 53,053 10,177 21,453
Proceeds from issue
of preference shares - 2,000 2,000
Redemption of preference
shares and interest
payment - - (2,076)
Cost of share issue 15 (1,828) (196) (693)
Bank borrowings drawn - 15,525 20,475
Bank borrowings repaid - (175) (2,070)
Loan arrangement fees
paid - (240) (287)
Interest paid 5 (270) (233) (446)
Dividends paid to equity
holders 9 (644) - (310)
------------------------------ ----- ------------ ------------ ----------
Net cash flow generated
from financing activities 50,311 26,858 38,046
------------------------------ ----- ------------ ------------ ----------
Net increase in cash
and cash equivalents
for the period 4,861 1,890 1,680
------------------------------ ----- ------------ ------------ ----------
Cash and cash equivalents 1,680 - -
at start of period
------------------------------ ----- ------------ ------------ ----------
Cash and cash equivalents
at end of period 6,541 1,890 1,680
------------------------------ ----- ------------ ------------ ----------
Condensed Consolidated Statement of Changes in Equity
Share Share Share Other Retained Total
capital premium warrant reserves earnings
reserves
Six months ended GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
30 September 2017
(unaudited)
---------------------------- --------- --------- ---------- ---------- ---------- --------
1 April 2017 215 20,454 91 34 4,577 25,371
---------------------------- --------- --------- ---------- ---------- ---------- --------
Profit for the period - - - - 3,056 3,056
---------------------------- --------- --------- ---------- ---------- ---------- --------
Total comprehensive
income - - - - 3,056 3,056
Dividends to shareholders - - - - (644) (644)
Long term incentive
plan 5 611 - (19) - 597
Issue of Ordinary
Shares 461 50,752 (2) - - 51,211
30 September 2017 681 71,817 89 15 6,989 79,591
---------------------------- --------- --------- ---------- ---------- ---------- --------
Year ended 31 March
2017 (audited)
8 December 2015 - - - - - -
---------------------------- --------- --------- ---------- ---------- ---------- --------
Profit for the period - - - - 4,887 4,887
---------------------------- --------- --------- ---------- ---------- ---------- --------
Total comprehensive
income - - - - 4,887 4,887
Dividends to shareholders - - - - (310) (310)
Long term incentive
plan - - - 34 - 34
Issue of Ordinary
Shares 215 20,454 91 - - 20,760
31 March 2017 215 20,454 91 34 4,577 25,371
---------------------------- --------- --------- ---------- ---------- ---------- --------
8 December 2015 - - - - - -
---------------------------- --------- --------- ---------- ---------- ---------- --------
Profit for the period - - - - 2,609 2,609
---------------------------- --------- --------- ---------- ---------- ---------- --------
Total comprehensive
income - - - - 2,609 2,609
Long term incentive
plan - - - 17 - 17
Issue of Ordinary
Shares 103 9,787 91 - - 9,981
---------------------------- --------- --------- ---------- ---------- ---------- --------
30 September 2016 103 9,787 91 17 2,609 12,607
---------------------------- --------- --------- ---------- ---------- ---------- --------
Notes to the Interim Financial Statements
1. Corporate information
Pacific Industrial & Logistics REIT plc (the "Company") and
its subsidiaries (the "Group") carry on the business of property
lettings throughout the United Kingdom. The Company is a public
limited company incorporated and domiciled in England and Wales and
listed on the AIM Market of The London Stock Exchange. The
registered office address is 124 Sloane Street, London, SW1X
9BW.
2. Basis of preparation
The interim financial information in this report has been
prepared using accounting policies consistent with IFRS as adopted
by the European Union. IFRS is subject to amendment and
interpretation by the International Accounting Standards Board
(IASB) on the IFRS Interpretations Committee and there is an
ongoing process of review and endorsement by the European
Commission. The financial information has been prepared on the
basis of IFRS that the Directors expect to be adopted by the
European Union and applicable as at 31 March 2018. The Group has
chosen not to adopt IAS 34 "Interim Financial Statements" in
preparing the interim financial information.
The Group's financial information has been prepared on a
historical cost basis, except for investment property and
derivative interest rate caps which have been measured at fair
value.
The functional currency of the Group is considered to be pounds
sterling as this is the currency of the primary environment in
which the company operates.
Going concern
The Directors have reviewed the current and projected financial
position of the Group, making reasonable assumptions about future
trading performance. As part of the review, the Group has
considered its cash balances, its debt maturity profile, including
undrawn facilities, and the long-term nature of the tenant
leases.
On the basis of this review, and after making due enquiries, the
Directors have a reasonable expectation that the Company and the
Group have adequate resources to continue in operational existence
for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the interim financial
statements.
Statutory accounts
Financial information contained in this document foes not
constitute statutory accounts within the meaning of section 434 of
Companies Act 2006 (the "Act"). The statutory accounts for the year
ended 31 March 2017 have been filed with the Registrar of
Companies. The report of the auditors on those statutory accounts
was unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under section 498(2) or
(3) of the Act.
The financial information for the six months ended 30 September
2017 and the period ended 30 September 2016 is unaudited.
3. Significant accounting judgements, estimates and assumptions
The preparation of the financial statements in conformity with
the generally accepted accounting practices requires management to
make estimates and judgements that affect the reported amounts of
assets and liabilities as well as the disclosure of contingent
assets and liabilities at the statement of financial position date
and the reported amounts of revenue and expenses during the
reporting period.
Business combinations
The Group acquires subsidiaries that own real estate. At the
time of acquisition, the Group considers whether each acquisition
represents the acquisition of a business or the acquisition of an
asset. The Group accounts for an acquisition as a business
combination where an integrated set of activities is acquired in
addition to the property.
Where such acquisitions are not judged to be the acquisition of
a business, they are not treated as business combinations. Rather
the cost to acquire the corporate entity is allocated between
identifiable assets and liabilities of the entity based upon their
relative fair values at the acquisition date. Accordingly, no
goodwill or additional deferred tax arises.
Long-term incentive plan
In determining the fair value of the long-term incentive plan
and the related charge to the statement of comprehensive income,
the group makes assumptions about future events and market
conditions.
In particular, judgement must be formed as to the likely number
of shares that will vest, and the fair value of each award
granted.
The fair value is determined using a valuation model which is
dependent on a number of assumptions of the Group's future dividend
policy and the future volatility in the price of the group's
shares. Such assumptions are based on publicly available
information and reflects market expectation. Different assumptions
about these factors to those made by the group could materially
affect the reported value of long-term investment plan.
Details of the Group's long-term incentive plan can be found in
note 8.
Fair value of investment property
The market value of investment property is determined by real
estate valuation experts, to be the estimated amount for which a
property should exchange on the date of the valuation in an arm's
length transaction. Each property has been valued on an individual
basis. The valuation experts use recognised valuation techniques
and the principles of IFRS 13.
The valuations have been prepared in accordance with RICS
Valuation - Professional Standards January 2017 (the "Red Book").
Factors reflected include current market conditions, annual
rentals, lease lengths and location. The significant methods and
assumptions used by the valuers in estimating the fair value of
investment property are set out in note 10.
4. Principal accounting policies
The accounting policies applied by the Group in this interim
report are the same as those applied by the Group in the
consolidated financial statements for the year ended 31 March 2017.
These accounting policies are set out below:
Basis of consolidation
The financial statements consolidate the accounts of the Company
and all subsidiary undertakings drawn up to the same period
end.
Business combinations
The acquisition of subsidiaries is accounted for using the
acquisition method. The cost of the acquisition is measured at the
aggregate of the fair values of assets given, liabilities incurred
or assumed, and equity instruments issued by the Group in exchange
for control of the acquiree. At the Group level, acquisition costs
are recognised in the Statement of Comprehensive income as
incurred.
The acquiree's identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under IFRS 3
are recognised at their fair value at the acquisition date.
Subsidiaries are entities which the Group has the power to
govern the financial and operating policies generally accompanying
a shareholding of more than 50% of the voting rights. The existence
and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether
the Group controls another entity.
Subsidiary entities are consolidated from the date on which
control is transferred to the Group and are deconsolidated from the
date on which control ceases. In respect of subsidiaries,
inter-company transactions and unrealised gains on intra-group
transactions are eliminated on consolidation.
The financial information of the subsidiaries is prepared for
the same reporting periods as the parent company, using consistent
accounting policies.
Segmental reporting
IFRS 8 requires operating segments to be identified on the basis
of internal reports that are regularly reported to the chief
operating decision maker to allocate resources to the segments and
to assess their performance. Following strategic review, the
directors consider there to be only one reportable segment, being
the investment in the United Kingdom of medium size industrial
warehouses.
Investment properties
Investment properties comprises completed property that is held
to earn rentals or for capital appreciation or both.
Investment properties are initially recognised at cost including
transactions costs. Transaction costs include transfer taxes and
professional fees for legal services. Subsequent to initial
recognition investment properties are carried at fair value, as
determined by real estate valuation experts. Gains or losses
arising from change in fair value is recognised in the statement of
comprehensive income in the period in which they arise.
On disposal of an investment property, the difference between
the disposal proceeds and the carrying amount is recognised in the
statement of comprehensive income.
Financial instruments
Financial assets and financial liabilities are recognised in the
Statement of Financial Position when the Group becomes a party to
the contractual provisions of the instrument.
Financial assets
Trade and other receivables are initially recognised at fair
value and subsequently measured at amortised cost, using the
effective interest rate method.
A provision is established for irrecoverable amounts when there
is objective evidence that amounts due under the original payment
terms will not be collected. The amount of any provision is
recognised in the statement of comprehensive income.
Cash and cash equivalents are recognised initially at fair value
and subsequently measured at amortised cost. Cash and cash
equivalents comprise cash in hand, deposits held with banks and
other short-term, highly liquid investments with original
maturities of three months or less.
Financial liabilities
Financial liabilities, equity instruments and warrant
instruments issued by the Group are classified in accordance with
the substance of the contractual arrangements entered into and the
definitions of a financial liability and an equity instrument. An
equity instrument is any contract that evidences a residual
interest in the assets of the Group after deducting all of its
liabilities. Equity instruments issued by the Group are recorded at
the proceeds received, net of direct issue costs.
Trade and other payables are initially measured at fair value,
and are subsequently measured at amortised cost using the effective
interest rate method.
Derivative financial instruments
Derivative financial instruments, comprising interest rate caps
and swaps for hedging purposes, are initially recognised at cost
and are subsequently measured at fair value being the estimated
amount that the Group would receive or pay to terminate the
agreement at the period end date, taking into account current
interest rate expectations and the current credit rating of the
Group and its counterparties. The gain or loss at each fair value
measurement date is recognised in the statement of comprehensive
income. Premiums payable under such arrangements are initially
capitalised into the statement of financial position, subsequently
they are remeasured and held at their fair values.
Hedge accounting has not been applied in these financial
statements.
Borrowing costs
Borrowing costs in relation to interest charges on bank
borrowings are expensed in the period to which they relate. Fees
incurred in relation to the arrangement of bank borrowings are
capitalised and expensed on a straight-line basis over the term of
the loan.
Revenue recognition
Revenue is recognised to the extent that it is probable that
economic benefits will flow to the Company and the revenue can be
reliably measured. Revenue is measured at the fair value of the
consideration received, excluding discounts, rebates, VAT and other
sales taxes or duties.
Rental income from operating leases on properties owned by the
Company is accounted for on a straight-line basis over the term on
the lease. Rental income excludes service charges and other costs
directly recoverable from tenants.
Dividends
Dividends on equity shares are recognised when they become
legally payable. In the case of interim dividends, this is when
paid. In the case of final dividends, this is when approved by the
shareholders at the Annual General Meeting.
5. Finance expense
Six months to Period to Year ended
30 Sep 17 30 Sep 16 31 Mar 17
(unaudited) (unaudited) (audited)
For the six months ended GBP'000 GBP'000 GBP'000
--------------------------------------------------- -------------- ------------ -----------
Interest on bank borrowings 270 233 446
Amortisation of loan arrangement fees 51 37 78
Interest on preference shares - 57 76
---------------------------------------------------- -------------- ------------ -----------
321 327 600
--------------------------------------------------- -------------- ------------ -----------
Changes in fair value of interest rate derivative (61) 174 115
---------------------------------------------------- -------------- ------------ -----------
(61) 174 115
--------------------------------------------------- -------------- ------------ -----------
6. Taxation
As a REIT, the Group is exempt from corporation tax on the
profits and gains from its property investment business, provided
it continues to meet certain conditions as per REIT regulations.
For the period ending 30 September 2017, the Group did not have any
non-qualifying profits and accordingly there is no tax charge in
the period. Any non-qualifying profits and gains however will
continue to be subject to corporation tax.
7. Earnings per share
The calculation of the basic earnings per share ("EPS") was
based on the profit attributable to ordinary shareholders divided
by the weighted average number of ordinary shares outstanding
during the period, in accordance with IAS 33.
Six months to Period to Year ended
30 Sep 17 30 Sep 16 31 Mar 17
(unaudited) (unaudited) (audited)
For the six months ended GBP'000 GBP'000 GBP'000
------------------------------------------------------------------------ -------------- ------------ -----------
Profit attributable to Ordinary Shareholders
Total comprehensive income (GBP'000) 3,056 2,609 4,887
------------------------------------------------------------------------- -------------- ------------ -----------
Weighted average number of Ordinary Shares in issue 32,929,276 5,886,056 10,441,474
Basic earnings per share (pence) 9.28p 44.33p 46.80p
------------------------------------------------------------------------- -------------- ------------ -----------
Number of diluted shares under option/warrant 88,860 90,810 90,510
Weighted average number of Ordinary Shares for the purpose of dilutive
earnings per share 33,018,136 5,976,866 10,531,984
------------------------------------------------------------------------- -------------- ------------ -----------
Diluted earnings per share (pence) 9.25p 43.66p 46.40p
------------------------------------------------------------------------- -------------- ------------ -----------
Adjustments to remove:
Changes in fair value of investment property (GBP'000) (2,829) (2,383) (3,881)
Changes in fair value of interest rate derivatives (GBP'000) (61) 174 115
------------------------------------------------------------------------- -------------- ------------ -----------
EPRA earnings (GBP'000) 166 400 1,121
EPRA adjusted diluted earnings per share 0.50p 3.85p 7.82p
------------------------------------------------------------------------- -------------- ------------ -----------
Adjustments to add back:
LTIP crystallisation 616 - -
------------------------------------------------------------------------ -------------- ------------ -----------
Adjusted earnings (GBP'000) 782 400 1,121
Adjusted earnings per share 2.37p 3.85p 7.82p
------------------------------------------------------------------------- -------------- ------------ -----------
The profit before tax for the six-month period to 30 September
2017 includes a GBP0.62m charge in relation to the crystallisation
of the Long-Term Incentive Plan ("LTIP"). The Directors believe
that a more appropriate measure to assess the underlying operating
performance of the business is to add back the LTIP crystallisation
charge to the EPRA earnings for the period.
8. Long-term incentive plan ("LTIP")
The Company has a Long-Term Incentive Plan ("LTIP"), accounted
for as an equity settled share based payment. At 30 September 2017,
Pacific Industrial LLP, an affiliate of Pacific Investments
Limited, has subscribed for 1,000 B Ordinary Shares of GBP0.01 each
and 1,000 C Ordinary Shares of GBP0.01 each issued in Pacific
Industrial & Logistics Limited, a subsidiary of the Company, as
detailed.
Fair Value Charge
at Grant for the
Period
Date options Class of Number GBP'000 GBP'000
granted Share
-------------- ------------ -------- ----------- ---------
April 2016 A Ordinary 1,000 76 590
April 2016 B Ordinary 1,000 307 4
August 2017 C Ordinary 1,000 131 3
--------------- ----------- -------- ----------- ---------
597
--------------------------- -------- ----------- ---------
On 13 July 2017, the A Ordinary Shares were crystallised and the
resulting value was paid by way of the issue of 520,557 Ordinary
Shares to Pacific Industrial LLP, an affiliate of the Manager.
Following the completion of the placement of Ordinary Shares in
Pacific Industrial & Logistics REIT plc (the "Company") on 17
August 2017, the Company amended the existing LTIP adopted at the
time of IPO.
The new LTIP will have an EPRA NAV element and a share price
element and will be assessed on: i) 30 September 2020 (the "First
Calculation Date") and ii) 30 September 2023 (the "Second
Calculation Date"). The EPRA NAV element will be 10 per cent. of
the excess of the EPRA NAV per Ordinary share return over an
annualised 9 per cent. hurdle, multiplied by the number of Ordinary
shares in issue at the relevant calculation date. The share price
element will be 10 per cent. of the excess of the share price
return over an annualised 9 per cent. hurdle, multiplied by the
number of Ordinary shares in issue at the relevant calculation
date.
At the First Calculation Date, the share price element and the
EPRA NAV element hurdle shall be calculated by reference to the
Placing Price.
At the Second Calculation Date, if a payment has been made at
the First Calculation Date under either element, the hurdle for
that element at the Second Calculation Date shall be re-set to be
based on the prevailing EPRA NAV per Ordinary Share/share price as
at the First Calculation Date (as applicable). If no payment is
made under an element at the First Calculation Date, then the
hurdle for that element shall continue to be calculated by
reference to the Placing Price.
9. Dividends
Six months Period Year ended
to to
30 Sep 30 Sep 31 Mar
17 16 17
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------- ------------ ------------ -----------
Ordinary dividends paid
2017 Interim dividend:
3.00p per share - - 310
2017 Second interim dividend: 644 - -
3.00p per share
Total dividends paid 644 - 310
-------------------------------- ------------ ------------ -----------
The Board has declared a third interim dividend for the
financial year ended 31 March 2017 of 0.23 pence per share and an
interim dividend relating to the period ended 31 March 2018 of 1.00
pence per ordinary share. These have not been recognised in the
financial statements and both will be paid on or around 22 December
2017 to shareholders on the register at the close of business on 1
December 2017. The ex-dividend date will be 30 November 2017.
10. Investment properties
In accordance with IAS 40 "Investment Property", investment
property is carried at its fair value as determined by an external
valuer. This valuation has been conducted by CBRE and has been
prepared as at 31 March 2017, in accordance with the RICS valuation
- Professional Standards January 2017 (the "Red Book").
The valuations have been prepared in accordance with those
recommended by the International Valuation Standards Committee and
are consistent with the principles in IFRS 13.
Investment Investment
properties properties
freehold leasehold Total
GBP'000 GBP'000 GBP'000
----------------------------- ------------ ------------ ---------
As at 1 April 2017 41,040 2,380 43,420
Property additions through
business combinations 25,956 15,361 41,317
Property additions through
acquisitions 5,870 9 5,879
Change in fair value during
the period 2,809 20 2,829
------------------------------ ------------ ------------ ---------
As at 30 September 2017 75,675 17,770 93,445
------------------------------ ------------ ------------ ---------
11. Business combinations
On 28 September 2017, the Group obtained sole control of Citruz
Prop 4 Sarl, Citruz General Partner 2 Limited and Citruz Haverhill
Limited, property investment companies incorporation in Luxembourg,
England and Wales and Jersey respectively, through the acquisition
of the entire issued share capital in the companies.
The table below sets out the provisional fair values to the
Group in respect of this acquisition.
Book Redemption Fair Total
Value of Liabilities Value
Adjustments
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------- ---------------- ------------- --------
Investment properties 40,868 - 449 41,317
Cash - - - -
Other receivables 719 - (719) -
Finance liabilities (37,116) 37,116 - -
Other liabilities (157) - - (157)
---------------------------
Total 4,314 37,116 (350) 41,160
--------------------------- --------- ---------------- ------------- --------
Net cash outflow arising
on acquisition:
Total consideration 41,160
Cash and cash equivalents -
acquired
--------------------------- --------- ---------------- ------------- --------
Cash consideration
net of cash acquired 41,160
--------------------------- --------- ---------------- ------------- --------
12. Bank borrowings
Any associated fees in arranging the bank borrowings that are
unamortised as at the period end are offset against amounts drawn
on the facilities as shown in the following table:
Six months Period Year
to to ended
30 Sep 31 Mar
30 Sep 17 16 17
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
---------------------------- ------------ ------------ ----------
Falling due in more than
one year
Bank borrowings drawn:
due in more than one year 18,405 15,350 18,405
Less: unamortised costs (158) (203) (209)
---------------------------- ------------ ------------ ----------
Total bank borrowings
per the Condensed Group
Statement of Financial
Position 18,247 15,147 18,196
---------------------------- ------------ ------------ ----------
13. Interest rate derivatives
The Group has used interest rate swaps to mitigate exposure to
interest rate risk. The total fair value of these contracts are
recorded in the statement of financial position. The interest rate
derivatives are marked to market by the relevant counterparty banks
on a quarterly basis in accordance with IAS 39. Any movement in the
fair value of the interest rate derivatives are taken to finance
costs in the statement of comprehensive income.
Six months Period Year
to to ended
30 Sep 30 Sep 31 Mar
17 16 17
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
--------------------------- ------------ ------------ ----------
Non-current liabilities:
derivative interest rate
swaps:
At beginning of period (115) - -
Change in fair value in
the period 61 (174) (115)
--------------------------- ------------ ------------ ----------
(54) (174) (115)
--------------------------- ------------ ------------ ----------
14. Share capital
30 Sep 30 Sep
17 17
(unaudited) (unaudited)
Number GBP'000
-------------------------- ------------ ------------
Issued and fully paid up
at 1p each 68,114,724 681
---------------------------- ------------ ------------
At beginning of period 21,452,210 215
Issued and fully paid - 5,000 -
11 May 2017
Issued and fully paid -
17 August 2017 46,657,514 466
At 30 September 2017 68,114,724 681
---------------------------- ------------ ------------
On 11 May 2017, 5,000 warrant shares were redeemed for an issue
price of 97.0 pence per share.
On 17 August 2017, Pacific Industrial & Logistics REIT plc
raised GBP53.0 million through the issue of 46,086,957 Ordinary
shares at an issue price of 115.0 pence per share.
On 17 August 2017, 50,000 warrant shares were redeemed for an
issue price of 97.0 pence per share.
On 13 July 2017, an element of the Company's long-term incentive
plan crystallised and the resulting value was paid by way of the
issue of 520,557 Ordinary shares on 17 August 2017.
At 30 September 2017, there were 2,962,000 warrant shares in
issue. Each warrant holder has the right to subscribe for Ordinary
shares on the basis of one new Ordinary share for each warrant held
at a strike price of 97.0 pence per Ordinary share.
15. Share premium
Share premium relates to amounts subscribed for share capital in
excess of nominal value less any associated issued costs that have
been capitalised.
Six months Period Year
to to ended
30 Sep 30 Sep 31 Mar
17 16 17
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
---------------------------- ------------ ------------ ----------
Balance brought forward 20,454 - -
Share premium on the issue
of ordinary shares 52,595 9,983 21,147
Crystallisation of LTIP 611 - -
- Ordinary A shares
Share issue costs (1,828) (196) (693)
----------------------------- ------------ ------------ ----------
71,832 9,787 20,454
---------------------------- ------------ ------------ ----------
16. Related party transactions
Transactions between the Company and its subsidiaries are in the
normal course of business. Such transactions are eliminated on
consolidation.
During the period, the amount approved for services provided by
Pacific Capital Partners Limited (the "Manager") totalled GBP0.19
million. The total amount outstanding at the period end relating to
the Investment Management Agreement was GBP0.19 million.
Acquisition of investment properties
During the period, the Group incurred fees totalling GBP205,000
from M1 Agency LLP, a partnership in which Richard Moffitt is a
partner, in relation to the acquisition of nine investment
properties. The fees charged were in line with standard commercial
property terms, and have been approved by the Board (not including
Richard Moffitt).
For the transaction listed above, Richard Moffitt's benefit is
derived from the profit allocation he receives from M1 Agency LLP
as a partner and not from the transaction.
Share capital
The table below details the share transactions of related
parties over the six-month period to 30 September 2017.
Name How related Shares No. of Percentage
purchased shares of Issued
in period held Share
Capital
---------------- --------------- ----------- -------- -----------
Non-executive
Nigel Rich chairman 108,695 183,695 0.3%
Richard Non-executive
Moffitt director 56,521 356,521 0.5%
Non-executive
Mark Johnson director 43,478 193,478 0.3%
Non-executive
Bruce Anderson director 17,391 37,391 0.1%
Jonathan Non-executive
Gray director 20,000 40,000 0.1%
Christopher
Turner Asset manager 86,956 286,956 0.4%
Long-term incentive plan
Under the terms of the Company's long-term incentive plan, at 30
September 2017 Pacific Industrial LLP, an affiliate of Pacific
Capital Partners Limited has subscribed for shares in Pacific
Industrial & Logistics Limited. Further details have been
provided in note 8.
17. Net asset value per share (NAV)
Basic NAV per share is calculated by dividing net assets in the
Condensed Statement of Financial Position attributable to Ordinary
shareholders by the number of Ordinary shares outstanding at the
end of the period. At 30 September 2017, there were 2,962,000
warrant shares in issue, that have a dilutive effect on NAV per
share.
Six months Period Year
to to ended
30 Sep 30 Sep 31 Mar
17 16 17
(unaudited) (unaudited) (audited)
Net assets per Condensed
Statement of
Financial Position (GBP'000) 79,606 12,607 25,371
------------------------------- ------------ ------------ -----------
Add:
Cash received from issued
share warrants (GBP'000) 2,873 2,936 2,926
------------------------------- ------------ ------------ -----------
Diluted NAV (GBP'000) 82,479 15,543 28,297
------------------------------- ------------ ------------ -----------
Adjustment for:
Fair value of interest
rate derivatives (GBP'000) 54 174 115
------------------------------- ------------ ------------ -----------
EPRA NAV (GBP'000) - basic 79,660 12,781 25,486
EPRA NAV (GBP'000) - diluted 82,533 15,717 28,412
------------------------------- ------------ ------------ -----------
Ordinary shares:
Number of Ordinary shares
in issue at period end 68,114,724 10,317,910 21,452,210
Number of Ordinary shares
for the purposes of dilutive
Net Asset Value per share
at period end 71,076,724 13,344,910 24,469,210
------------------------------- ------------ ------------ -----------
Basic NAV 116.87p 122.18p 118.26p
EPRA NAV - basic 116.95p 123.87p 118.80p
------------------------------- ------------ ------------ -----------
Diluted NAV 116.04p 116.47p 115.64p
EPRA NAV - diluted 116.12p 117.77p 116.11p
------------------------------- ------------ ------------ -----------
18. Subsequent events
On 10 November 2017, the Company acquired a logistics asset in
Leeds for a total consideration of GBP2.8 million, representing a
net initial yield of 6.8%.
On 16 November 2017, the Company disposed of site in Bedford for
a total consideration of GBP5.8m, representing a net initial yield
of 6.0%.
Supplementary information
i. EPRA performance measures summary
Six months to Period to Year ended
30 Sep 17 30 Sep 16 31 Mar 17
(unaudited) (unaudited) (unaudited)
GBP'000 GBP'000 GBP'000
--------------------------------------------------- -------------- ------------ ------------
EPRA earnings per share (diluted) 0.50p 3.85p 7.82p
EPRA net asset value per share (diluted) 116.12p 117.77p 116.11p
EPRA triple net asset value per share (diluted) 116.04p 116.47p 115.65p
---------------------------------------------------- -------------- ------------ ------------
EPRA net initial yield 6.7% 6.7% 6.5%
EPRA 'topped up' net initial yield 7.0% 7.6% 7.1%
EPRA vacancy rate 1.9% 0.0% 3.8%
EPRA cost ratio (including vacant property costs) 28.6% 24.0% 22.3%
EPRA cost ratio (excluding vacant property costs) 26.4% 24.0% 22.3%
---------------------------------------------------- -------------- ------------ ------------
ii. Income statement
Six months Period Year
to to ended
30 Sep 30 Sep 31 Mar
17 16 17
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
-------------------------- ------------ ------------ ----------
Gross rental income 1,530 988 2,277
Property operating costs (72) (10) (25)
--------------------------- ------------ ------------ ----------
Net rental income 1,458 978 2,252
Administrative expenses (377) (234) (499)
Long-term incentive plan
charge (597) (17) (34)
--------------------------- ------------ ------------ ----------
Operating profit before
interest and tax 484 727 1,719
Net finance costs (318) (327) (598)
--------------------------- ------------ ------------ ----------
Profit before tax 166 400 1,121
Tax on EPRA earnings - - -
-------------------------- ------------ ------------ ----------
EPRA earnings 166 400 1,121
--------------------------- ------------ ------------ ----------
iii. Balance sheet
Six months Period Year
to to ended
30 Sep 30 Sep 31 Mar
17 16 17
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
-------------------------------- ------------ ------------ ----------
Investment property 93,445 29,900 43,420
Other net assets/(liabilities) 4,462 (1,972) 262
Net borrowings (18,247) (15,147) (18,196)
--------------------------------- ------------ ------------ ----------
EPRA net assets 79,660 12,781 25,486
--------------------------------- ------------ ------------ ----------
iv. EPRA net initial yield and 'topped up' net initial yield
Six months Period Year
to to ended
30 Sep 30 Sep 31 Mar
17 16 17
(unaudited) (unaudited) (unaudited)
GBP'000 GBP'000 GBP'000
------------------------------ ------------ ------------ ------------
Investment property - wholly
owned 93,445 29,900 43,420
------------------------------ ------------ ------------ ------------
Completed property portfolio 93,445 29,900 43,420
Add:
Allowance for estimated
purchasers' costs 6,109 1,914 2,808
EPRA property portfolio
valuation (A) 99,554 31,814 46,228
------------------------------ ------------ ------------ ------------
Annualised passing rent 6,915 2,178 3,068
Less irrecoverable property
costs (277) (38) (43)
------------------------------ ------------ ------------ ------------
Annualised net rents (B) 6,638 2,141 3,025
------------------------------ ------------ ------------ ------------
Contractual rental increased
for rent free period 373 266 257
'Topped up' annualised
net rent ('C) 7,011 2,407 3,282
------------------------------ ------------ ------------ ------------
EPRA net initial yield
(B/A) 6.7% 6.7% 6.5%
------------------------------ ------------ ------------ ------------
EPRA 'topped up' net initial
yield (C/A) 7.0% 7.6% 7.1%
------------------------------ ------------ ------------ ------------
v. EPRA vacancy rate
Six months Period Year
to to ended
30 Sep 30 Sep 31 Mar
17 16 17
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
----------------------------- ------------ ------------ ----------
Annualised potential rental
value of vacant properties 132 - 132
Annualised potential rental
value for the completed
property portfolio 7,065 2,477 3,475
EPRA vacancy rate 1.9% 0.0% 3.8%
----------------------------- ------------ ------------ ----------
vi. EPRA cost ratio
Six months Period Year
to to ended
30 Sep 30 Sep 31 Mar
17 16 17
(unaudited) (unaudited) (unaudited)
GBP'000 GBP'000 GBP'000
----------------------------------- ------------ ------------ ------------
Costs
Property operating expenses 72 10 25
Administrative expenses 377 234 499
Less:
Ground rents (15) (10) (22)
Total costs including vacant
property costs (A) 434 234 502
----------------------------------- ------------ ------------ ------------
Group vacant property costs (34) - -
Total costs excluding vacant
property costs (B) 400 234 502
----------------------------------- ------------ ------------ ------------
Gross rental income 1,530 988 2,277
Less:
Ground rents (15) (10) (22)
Total gross rental income
(C') 1,515 978 2,255
----------------------------------- ------------ ------------ ------------
Total EPRA cost ration (including
vacant property costs) (A/C) 28.6% 24.0% 22.3%
Total EPRA cost ration (excluding
vacant property costs) (B/C) 26.4% 24.0% 22.3%
----------------------------------- ------------ ------------ ------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR KKLBFDFFFFBQ
(END) Dow Jones Newswires
November 20, 2017 02:00 ET (07:00 GMT)
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